How Share Model Works in start up?
How share model works in startup? I have a investor who is relative wants to invest 20 Lakh as a sleeping partner. So how much share he can expect and what would be the model of profilt he will be expecting. Later on if any angle investor/vc firm will be part of investor, than how will be the share calculation. Please help me if any body has knowledge on this. Currently company has 1L capital with 2 directors.
Its a big thing to answer. Will reply in detailed later, but here is how it works.
Calculate DCF (you can chose other method too), devide DCF by total equity and you get value of each share. Sell shares as per the value arrived.
Shareholders are different from management, shareholders enjoy profits of company. Shareholders need not to be part of management running the business.
Whether VC/investor or relative you can use same method.
Thanks Pulkit. Let me give you little more scenario. Current capital of company is 1Lakh, and if investors wants to put 20Lakh in company thn what would be clause, is it like he can put max 1 Lakh and rest 19 lakh will be taken as Loan. Point here is can Investor put any amount irrespective of capital share, or any other scenario is ther.
The investors can invest in shares of the company upto the limit of authorised capital of the Company. For eg: if authorised cap is Rs. 5 lakh and paid up is Rs. 1 lakh than investor can invest remaining Rs. 4 lakh. If they want to invest more than Rs. 4 lakhs in shares than the company have to increase the authorised capital first.